TSXV White Paper – or Whitewash?

The TSXV has published a White Paper that needs to be downloaded and read.
Hit http://www.tsx.com/revitalizing-tsxv?lang=en and half way down that page,
hit “Read the White Paper”

After the White Paper was published, but before the town hall meetings, the TSXV and its masters at the TMX Group received feedback that should have changed the shameless and shamelessly inadequate and promotional whitewash paper.

Take a look at John Kaiser’s detailed comments.  More realistic thought is displayed here than all the TSXV bureaucrats have been able to muster up for their self-serving promotion.  http://www.kaiserresearch.com/s/KaiserBlog.asp?ReportID=737400

Then please read Don Mosher’s letter, as it does a great job of summarizing realities that the TSXV apparently does not want to face.

Personal letter from Don Mosher to TMX:

From: Don Mosher [mailto:don@venturefunding.biz]
Sent: Monday, December 14, 2015 2:48 PM
To: John McCoach <john.mccoach@tsx.com>
Cc: Nick Thadaney <Nick.Thadaney@tmx.com>
Subject: my own personal thoughts on your requested comments

Your request for suggestions may have come too late.

Commodity prices have caused an enormous problem but in the past the Canadian venture markets have been able to ride out those difficult times. Not anymore. The Venture Exchange and its issuers cannot survive without public participation in the markets. That participation has been actively discouraged by the onslaught of costs, delays, and oversight that the TSX, provincial Securities Commissions, and IIROC have imposed.
Security regulators have done everything in their power to discourage speculative investment through the Client Relationship Model 1 & 2 (CRM). The compliance costs coupled with liability aspects are rapidly exterminating the boutique brokerage businesses. Contributions to FAIR Canada, a lobby group funded partly by IIROC and the OSC, demonstrate an additional intent to destroy the businesses that fund the TSXV. IIROC member notices disclose one member suspension, one resignation and 3 mergers in the last 6 weeks. Where there were 8 boutique firms, are now 3.

The Provincial Commissions (CCRM) proposed changing the rights offering rules a year ago but actually completed this minor task only recently. This example demonstrates how long it takes to enact logical changes to illogical regulations that made rights offerings unworkable.

Canada is a country of 35 million people with markets that represent 2% of Global Equity Values , and with an economy that is predominantly resource based. Our markets, especially the TSXV, should represent what and who we are. Instead of trying to compete with the US by matching them regulation for regulation, our markets should differentiate us from the rest of the world. Our market needs to be cheap, transparent, and simple enough that an elementary school student can understand it.

Here are some realities that demonstrate why we need to be take a long hard look at ourselves. The JOBS Act in the US was proposed to aid private and public companies overcome the securities regulations imposed on markets which resulted in a contraction of the Small Cap IPO Market. It didn’t work. The US Congress is now voting on the Wall Street Growth Act, aimed at revitalizing the Small Cap IPO market for companies with a market cap of under $2 billion US.

The TSX and TSXV have just under 3500 companies listed, of which 147 ( this number fluctuates based on trading data) have market caps over $2 billion US. All the rest would be defined as US Small Cap or Nano Cap (in some cases, almost non-cap) companies. We need a venture market for ourselves, with the added growth potential of attracting companies struggling in the US because they are too small.

If the TSXV wants to survive, it needs to become the voice of speculative investment in Canada, encouraging risk taking and bringing diversification and innovation to the Canadian economy.

The Exchange needs to push back at IIROC and the CCRM to break down the barriers discouraging the public from participating in the Canadian venture space. Foreign investment is fleeing Canada, partially because of the commodities cycle, but also due to a lack of liquidity in a moribund market. If our regulators believe that investing in our own markets is inappropriate for Canadian citizens then why would foreign investors want to own our equities?

Below are my suggestions, some of which will need to be forced through IIROC and the CCRM.

1) Single platform computer trading, the old Vancouver Computer Trading system should be brought back, it was very simple and transparent. It was also created a very level playing field for the retail investor, there was no way to front run orders for example.
2) First in, first out
3) No shorting on downticks
4) Minimum commissions to compensate participating brokers
5) Strong marketing campaigns aimed at attracting Small Cap companies to come to a safe and regulated jurisdiction that encourages and nurtures innovation
6) A set number of listings on the exchange, no more than 2000
7) Suspension of the CPC Program
8) Encourage RTO’s, simplify change of business with existing shareholders getting preference into financings
9) Eliminate almost all exchange oversight, boards are liable for corporate decisions, allow them to make them.
10) Reduce halts to no more than a day unless there is an investigation into potential wrongdoing.
11) Eliminate TSXV regulations and work within the existing security regulations, the CSA has a booklet of guidelines while the TSXV has a binder of additional regulations

I have personal doubts that the Canadian venture markets can survive without radical change, and the above represents the minimum that is needed.

Best regards
Don Mosher